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The Teapot Dome Trials: 1926-30

Fall Owed Eight Years' Back Taxes

Fall had been elected as New Mexico's first senator when that state entered the Union in 1912. Born in 1861, he was a self-educated lawyer who had worked as a cowboy and prospector and, with drooping handlebar moustache and constant cigar, looked the part. He even toted a gun in the Senate. But now he owed eight years' taxes on his rundown ranch at Three Rivers, New Mexico, and had recently sold his major interest in the Albuquerque Journal to raise cash. Nearly broke, he was ready to quit the Senate. He took the cabinet post without hesitation.

The word "conservation" was not in Fall's vocabulary. He believed the government's lands—particularly the Naval Petroleum Reserves—should be held by private interests. He revised an executive order giving the Navy control over the reserves so that leasing did not require the approval of the Navy secretary. Next he recommended that the Navy take any royalties on oil sold from leased reserves not in cash but in oil certificates, which could be used to pay for construction done for the Navy.

By early 1922, Fall, playing on fear of drainage of the oil fields, was urging the Navy to develop Teapot Dome, build a pipeline to storage tanks on the Atlantic coast, and build storage tanks at Pearl Harbor in the Pacific. As Pacific builder, he proposed oilman Edward L. Doheny, who had prospected with him in 1886, leased profitable oil lands in California (Doheny brought in the first gusher in Los Angeles), and was currently worth $100 million.

Meantime, Harry F. Sinclair, head of the Sinclair Consolidated Oil Corporation, who had oil holdings worth $380 million, invited himself to visit Fall at his ranch. They talked about Sinclair's Mammoth Oil Company (he owned all the stock) obtaining a lease on the entire 9,481-acre Teapot Dome naval reserve.

In Washington, without competitive bidding, Fall signed the lease and locked it in his desk drawer. It gave Mammoth Oil exclusive rights to Teapot Dome oil for 20 years, with the government getting a royalty of 16 to 17 percent of the price per barrel, paid in oil certificates, which were to be used to buy fuel oil and storage tanks from Mammoth.

Word of the contract leaked. Neighbors observed sudden prosperity at Fall's ranch: A race horse and fine cattle arrived; Fall paid $100,000 to buy the ranch next-door and built a $35,000 hydroelectric plant; he also paid taxes owed since 1912.

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Law Library - American Law and Legal InformationNotable Trials and Court Cases - 1918 to 1940The Teapot Dome Trials: 1926-30 - Fall Owed Eight Years' Back Taxes, "sluice-way For Ninety Percent Of The Corruption"